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The Reserve Bank of India's (RBI) third repo-rate cut in 2019 was welcomed by the real estate fraternity and investors.
Ramesh Nair, CEO & Country Head, JLL India said that the Reserve Bank of India’s (RBI) rate cut is laudable. “As the residential sector is already at inflexion point signalling a sustainable recovery, this decision will support the trend,” explained Nair.
“This repo rate cut is likely to have a direct impact on the real estate sector, provided the banks, in turn, transmit the same by a corresponding reduction in lending rates,” he added.
It has been observed that, despite the 50 basis points (bps) reduction in repo rates by the RBI in the previous two reviews, the mortgage interest rate has remained sticky.
“As a result, the required benefit of the rate cut has not reached the home buyers. However, with regulations re-instating the home-buyers’ confidence in the segment, the markets witnessed a recovery in sales for the year 2018,” explained Nair.
Further, in the fourth quarter of 2019, sales grew by 28 per cent as compared to the corresponding quarter in 2018.
Echoing a similar sentiment, Aashish Agarwal, Senior Director, Valuation & Advisory Services at Colliers International India said, “The third rate cut by the RBI in four months, along with a change in policy stance - from neutral to accommodative is a clear sign that the Government is committed to reviving growth.”
In the backdrop of global trade wars and muted consumption demand, the real estate sector can be a catalyst for economic recovery, job creation and foreign investment. “The RBI's key challenge will be to ensure that banks pass on the benefits of these rate cuts to end borrowers and ease the liquidity crunch impacting the sector,” said Agarwal.
“The first rate cut in the newly elected government’s regime is certainly a welcome step, especially for the real estate sector,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.
The benefit of a lower policy rate, in terms of better credit cost as well as higher liquidity, will hopefully be transmitted further by banks to NBFCs as well as home buyers.
“ The cash-crunched NBFCs will definitely benefit from inflow of capital which will in turn benefit developers as well as home-buyers. NBFCs have been facing a liquidity crisis and this has negatively impacted their loans to real estate, including construction finance,” said Baijal.
He further said, “Besides capital infusion into this important financier segment, this rate cut will also improve the home-buyers affordability and stimulate housing demand at this critical juncture.”
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